3/21/2009

Surprise: "Dollar caps worst week in 24 years"

The dollar rebounded on Friday but still recorded its biggest weekly slide since 1985 as the Federal Reserve's plans to buy long-term government debt stoked fear about the erosion of the U.S. currency.

The Fed shocked financial markets this week when it said it would buy some $1 trillion of government and mortgage-backed debt in a bid to cut interest rates and kick-start lending. . . . . .

A trade war with Mexico over 97 trucks

The Obama Administration, by putting an end to a program that allowed some Mexican long-haul trucks into the U.S., has triggered a slew of retaliatory tariffs from Mexico. The White House seems to be looking for a way to resolve a dispute that it failed to avert, despite much forewarning. But it looks like it may be too late to avoid the $2.4 billion in tariffs altogether, experts say.

On Mar. 16, Mexico announced tariffs on about 90 items from 40 U.S. states, mostly on agricultural products. It was retaliation for Congress' decision last week to kill a program meant to defuse a dispute that has lasted more than 13 years over the right of U.S. and Mexican long-haul trucks to cross each other's border carrying goods. Mexico contends that the U.S. is violating the North American Free Trade Agreement, which provides for free movement by each member state's trucks. Congressional critics say Mexican trucks are unsafe and do not belong on U.S. roads. . . .

on Mar. 10, Congress passed a $410 billion government spending bill containing a clause inserted by Senator Byron Dorgan [D-N.D.] killing the pilot program, and the following day Obama signed it.

A study used as a weapon by both sides was issued on Feb. 6 by Joseph W. Come, Assistant Inspector General for the U.S. Transportation Dept. The study concluded that long-haul Mexican trucks were in many cases safer than similar U.S. vehicles. But critics of the trucking provision note that the study included a caveat that, in Come's opinion, the number of vehicles inspected was too small to be conclusive. . . . .

The program Congress terminated allowed 97 Mexican trucks to roam among them. Ninety-seven! Shutting them out not only undermines NAFTA. It caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade coming out of 40 states. . . . .

After repeated pledges by world leaders to avoid erecting trade barriers, protectionism is on the march, provoking nasty trade disputes and undermining efforts to plot a coordinated response to the deepest global economic downturn since World War II.

From a looming battle with China over tariffs on carbon-intensive goods to a spat over Mexican trucks using American roads, barriers are going up around the world. As the recession’s grip tightens, these pressures are likely to intensify, several experts said.

The surge in protectionism is casting a shadow over an economic summit meeting of world leaders scheduled for London on April 2. At the last such gathering, in Washington in November, former President George W. Bush persuaded the Group of 20 members to commit to protecting free trade — whatever the pressures caused by faltering economies and lost jobs. The members include industrialized and developing nations, and the European Union. . . . . .

Of course, all this going on with trade dropping a lot this year. The BBC reports:

Global trade flows are set to shrink by 9% during 2009, according to a forecast by the World Trade Organization (WTO).

Hardest hit will be developed nations, where trade is set to fall 10%. Poorer countries will see exports fall 2-3%.

The WTO blames the deepening recession for the downturn, but says trade could be "a potent tool" for recovery.

It would be the biggest drop in trade since World War II, said WTO Director-General Pascal Lamy, who called on global leaders to fight protectionism. . . . . .

ACORN Partners with Government in conducting Census

First it was President Obama trying to break all precedent and run the 2010 census from within the White House. While the administration finally backed down from that politicization of the census, it clearly hasn't learned its lesson. Now it is having ACORN officially "partner" with the Census to help count the number of Americans in the country. It's like Santa trusting a child to tell him how many times he or she has been good in the past year. . . . . .

Scaring Financial experts out of the US

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

The banker added: “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” . . . . .

More Questions on when Geithner knew about the bonuses

Jan. 28 (Bloomberg) -- American International Group Inc., the insurer saved from collapse last year by government money, may have committed more than $1 billion to employees to keep them from leaving the company.

About 400 workers at New York-based AIG’s financial products unit may get $450 million in two installments, said two people familiar with the situation who declined to be identified because the plan is confidential. That is in addition to about $619 million in retention pay going to 4,200 executives and employees at subsidiaries including life insurance.

AIG is trying to hold onto employees while it sells businesses to repay a government loan. The insurer took a federal bailout in September after the financial-products unit, which sold credit-default swaps that plunged in value amid the housing market collapse, caused about $34 billion in writedowns. AIG said the program was disclosed before the government rescue, which is now valued at $150 billion.

“I was extremely disappointed -- but not surprised -- to learn that AIG will be awarding bonuses to the very division that drove the company into the ground,” said Representative Elijah Cummings, a member of the House Committee on Oversight and Government Reform, in an e-mail. AIG shouldn’t be awarding “millions of unmerited dollars to employees while at the same time begging the U.S. government for financial life support.” . . . .

Ed Morrissey has a video where a congressman is publicly telling Geithner at a public hearing about the bonuses a week earlier than Geithner claimed that he knew.

Tim Geithner and Congress claim that they got blindsided by the AIG bonuses late last week, before anyone had a chance to stop AIG from paying them. However, C-SPAN’s video library tells a very different story. Watch the clip from a March 3rd hearing of the House Ways and Means Committee in which Rep. Joseph Crowley (D-NY) specifically mentions the upcoming payouts of over $162 million in bonuses to AIG execs, the very same number that inflamed Washington DC this week . . . . .

[Geithner] played a pivotal role in the intense negotiations which took place before Lehman Brothers went bankrupt, and also helped forge the deals involving AIG and JP Morgan. . . . . .

Here is something else from the end of last year. Apparently, Geitner was the person in charge of the negotiations with AIG.

Nov. 26 (Bloomberg) -- American International Group Inc., the insurer that said yesterday it scrapped bonuses for top executives after a U.S. bailout, will still pay 130 managers “cash awards” to stay with the firm, including $3 million to retirement services chief Jay Wintrob.

Wintrob, 51, will get the “retention” payment in two installments, the first in April 2009 and the rest a year later, New York-based AIG said today in a regulatory filing. The firm previously disclosed the program in a Sept. 26 filing and said today that Wintrob and Chief Financial Officer David Herzog elected to get the payments four months later than planned.

“The expectation from the public and Congress was that they weren’t getting bonuses, not that they’d be pushed off by several months,” said David Schmidt, a consultant at executive pay firm James F. Reda & Associates. “That clearly violates the spirit of AIG saying they’ll forgo their bonuses.”

Chief Executive Officer Edward Liddy is encouraging top employees at AIG subsidiaries to remain so the units retain their value while he finds buyers. The insurer is selling businesses, including the U.S. retirement group Wintrob heads, to repay a $60 billion loan included in the expanded government rescue package AIG got this month.

“We’ve said they aren’t eligible for annual bonuses, and they’re not,” Nicholas Ashooh, spokesman for AIG, said today in an interview. “What we’re talking about are retention agreements -- they’ve been pushed back by several months -- and it’s our hope that those businesses will be sold in several months.” . . . .

3/20/2009

Obama's deficits will be four times bigger than under Bush

President Barack Obama's budget would produce $9.3 trillion in deficits over the next decade, more than four times the deficits of Republican George W. Bush's presidency, congressional auditors said Friday.

The new Congressional Budget Office figures offered a far more dire outlook for Obama's budget than the new administration predicted just last month — a deficit $2.3 trillion worse. It's a prospect even the president's own budget director called unsustainable. . . . .

3/19/2009

The teleprompter president

Irish Prime Minister Brian Cowen was just a few paragraphs into an address in Washington when he realised it all sounded a bit too familiar.It was. He was repeating the speech President Barack Obama had just read from the same teleprompter.Mr Cowen stopped, turned to the president and said: "That's your speech."A laughing Mr Obama returned to the podium to take over but it seems the script had finally been switched and the US president ended up thanking himself for inviting everyone to the party.Mr Obama is an accomplished orator but is becoming known in America as the "teleprompt president" over his reliance on the machine when he gives a speech. . . . .

Fed's plan to print $1.2 trillion in new cash to inject in the economy

Monetary Policy: The Federal Reserve's plan to create $1.2 trillion out of thin air to buy Treasuries is a risky move, to say the least. If it doesn't boost output by an equal amount, the certain result will be inflation.

1) Inflation2) an increase in employment, but mainly from people making mistakes on what jobs that they should take. Jobs that will hopefully be eventually left.3) This is something third world countries have tried to do over time. Get a lot of debt and then create inflation so that the value of the debt is reduced in real value. This increases the risk of US debt in the future. This is essentially theft.4) Real interest rates will rise right now because we are taxed on nominal and not real interest.

Treasury Probes AIG Mess

Dems still can't blame themselves. Push it off and people might forget and tempers might cool. This from ABC News:

The Treasury Department's top watchdog is investigating what role Treasury officials at all levels played in AIG's decision to award over $160 million to employees of its cataclysmically failed Financial Products division, sources say.

The Treasury Department's top watchdog is investigating what role Treasury officials at all levels played in AIG's decision to award over $160 million to employees of its cataclysmically failed Financial Products division, sources say. . . . .

Who is to blame for the economics problems: By 60 to 31 percent it is the government, not Wall Street

John Fund at the WSJ Political Diary has this:

An Oxford-style debate held last night at New York's Rockefeller University featured an argument over whether Washington or Wall Street "was more to blame for the financial crisis." Before the program began, the 700 audience members voted to pin Washington with more of the onus by 42% to 30%, with 28% undecided. After spirited exchanges between six debaters, the post-debate vote was a knockout against the Beltway -- 60% fingered the nation's capital with more of the blame, with only 31% choosing Wall Street.

Last night's debate was joined early when historian Niall Ferguson listed four entities he said played a major role in the financial collapse -- the Federal Reserve, the SEC, Congress and the White House. "You will note all of them have addresses that end with Washington, D.C.," he concluded. The opposing team was led by Nell Minow of the Corporate Library, a research firm that rates boards of directors on corporate governance issues. She tripped up in the eyes of many by claiming that campaign contributions from Wall Street to naive Washington politicians meant that the nation's capital was "a victim" in the financial meltdown. . . . .

South Dakota Ends its 48 hour waiting period

Gun owners in South Dakota praised Gov. Mike Rounds on Friday for signing into law Senate Bill 70, which strikes the state's mandatory post-purchase 48-hour waiting period to buy a handgun.

The federal Brady Handgun Violence Prevention Act of 1993 requires an instant computer check of gun buyers through the FBI's National Instant Criminal Background Check System. Before SB70 was signed into law, only those people who had a valid permit to carry a concealed weapon in the state were exempt from the 48-hour waiting period. Now, anyone who wants to buy a handgun - and passes the federal check - can walk out of a licensed dealer's shop with one.

"If you're a law-abiding citizen, I don't have a problem with it," said Matt Johnson of Viborg, a handgun owner who was attending the Sioux Empire Sportsman's Show on Friday. "What we have to do is get tough on criminals and give us law-abiding citizens a chance. There's already enough laws. We need to stop giving criminals a slap on the wrist, enforce the laws we have now." . . . .

Why is the Washington Times the only place that I see that this was admitted to by the White House?

The Obama administration and one of its key allies in Congress belatedly acknowledged Wednesday that they were responsible more than a month ago for clearing the way for large bonuses to be paid inside taxpayer-supported companies like AIG, undercutting the White House's attempts to distance itself from a growing political embarrassment.

Meanwhile, fresh evidence emerged that more largesse was about to be doled out to the government's hand-picked executives running the troubled mortgage giant Fannie Mae. . . . .

John Fund from the WSJ Political Diary weighs in with this discussion of Dodd here:

It's exhausting trying to follow Connecticut Senator Chris Dodd's story about how and why a loophole was slipped into last month's stimulus bill that facilitated the scandalous bonuses at AIG.

The week began with Mr. Dodd, already under fire for sweetheart treatment from a mortgage company at the heart of the financial meltdown, denying that he was even a member of the conference committee that wrote the final version of the stimulus bill. He also said he thought the final language of his amendment in the stimulus bill should have blocked the AIG bonuses.

On Wednesday, he changed his story. He admitted that he allowed his amendment to be changed at the insistence of Treasury Department officials who worried that any curbs on executive compensation would spark lawsuits.

CNN's Wolf Blitzer asked him to explain the discrepancy between his two versions and what had caused him to clarify his remarks. "Going back and reviewing it," Mr. Dodd lamely replied. "I apologize if we had some confusion."

His explanation didn't wash with Mr. Blitzer. After Mr. Dodd's appearance, the CNN anchor concluded that the Senator now was "coming forward with a vastly different story" from what he had told CNN just the day before. "It's very embarrassing to Senator Dodd to say one thing yesterday and another thing today," was Mr. Blitzer's summation.

3/18/2009

An amusing editorial in the Washington Times

Washington is overwhelmed by anger over the AIG bonuses. How could government money be going to pay millions in bonuses to employees who were responsible for losses that resulted in AIG taking $173 billion in government bailouts? Of course, if we had our way, the government wouldn't have bailed out the company to begin with.

Politicians who supported the bailout have had their own solutions. Sens. Chris Dodd and Charles Schumer are threatening to get the bonus money back by taxing away every dollar that these former or current AIG employees get in bonuses. Yet, with deductions and other complications that won't get everything back.

Well, we have a simple solution to help make up the difference and help taxpayers get back some of the employees' supposed "ill-gotten" gains. . . .

Texas considering letting permit holders take their guns to work

A proposal that would allow Texans to come to work with a gun in their car sparked lively debate at a Senate committee hearing Tuesday.Business interests said to the Senate Criminal Justice Committee that with a growing number of Texas workers getting laid off, some might start shooting if they had a gun stowed in their car. Proponents said that as crime grows with the deepening recession, they need a pistol to make it safely to and from work."Even though I've had a concealed handgun permit from the start ... I can't protect myself coming to and from work," said Dallas resident Stephen Johnson, a defense contractor employee, citing current law that allows employers to ban workers from bringing handguns onto their property — even if they hold a state concealed handgun permit.State Sen. Glenn Hegar, R-Katy, the author of Senate Bill 730, said that despite the opposition, "having a weapon locked in your car does not mean it will be an unsafe work environment."Business groups disagreed, at one point prompting a lively exchange with Sen. Dan Patrick, R-Houston, a co-sponsor of the bill.Luke Bellsnyder, executive director of the Texas Association o f Manufacturers, which represents 300 businesses that employ 900,000 Texans, said the measure would infringe on an employer's right to keep workers safe and set the rules on the property."It's a public safety issue," he said.Patrick said: "To sit here and suggest this (bill) creates an unsafe environment is wrong. As an employer ... I think that argument is really weak." . . . .

an official with the Wyoming Department of Health said the Cowboy State will not be issuing the same warning to its residents, because state epidemiologists believe the effects are "very unlikely to be clinically significant." . . . .

While the CDC study found very small difference in lead levels for those who regularly ate animals killed with lead bullets "the elevated levels were not considered dangerous . . . ."

3/17/2009

FDIC Penalizes Massachusetts Bank for being too careful on who loans are given to

Does anyone not understand the type of pressure that the federal government put on banks to make bad loans? Fox News has the story here:

A Massachusetts bank that has defied the odds and remained free of bad loans amid the economic crisis is now being criticized by the Federal Deposit Insurance Corp. for the cautious business practices that caused its rare success.

"We’re paranoid about credit quality," he told the Boston Business Journal.

That paranoia has allowed East Bridgewater Savings Bank to stand out among a flurry a failing banks, with no delinquent loans or foreclosures on its books, the Journal reported. East Bridgewater Savings didn’t even need to set aside in money in 2008 for anticipated loan losses.

But rather than reward Petrucelli's tactics, the FDIC recently criticized his bank for not lending enough, slapping it with a "needs to improve" rating under the Community Reinvestment Act, the Journal reported. . . . .

ACORN to help do US Census

The U.S. Census is supposed to be free of politics, but one group with a history of voter fraud, ACORN, is participating in next year's count, raising concerns about the politicization of the decennial survey.

The Association of Community Organizations for Reform Now signed on as a national partner with the U.S. Census Bureau in February 2009 to assist with the recruitment of the 1.4 million temporary workers needed to go door-to-door to count every person in the United States -- currently believed to be more than 306 million people.

A U.S. Census "sell sheet," an advertisement used to recruit national partners, says partnerships with groups like ACORN "play an important role in making the 2010 Census successful," including by "help[ing] recruit census workers." . . .

Something that is missing from the anguish over AIG

Here’s something neither Obama nor Grassley answered in their bellicose remarks Monday: Why did it take so long for the president and senior lawmakers to get so worked up? More troubling, why did it take so long for them to discover AIG planned to give huge bonuses in the first place?

AIG disclosed its retention-bonus program more than a year ago, including bonuses directed to those handling the exotic derivatives that got the company and the country into this mess.

The bonuses were essentially a nonissue when AIG got its initial bailout money, almost $150 billion under President Bush in the two months surrounding the presidential election. Joe Biden, then the vice presidential nominee, came out strongly against the bailout. Obama did not. . . . . .

Contrasting two conferences on global warming

The first in Copenhagen, billed as "an emergency summit on climate change" and attracting acres of worldwide media coverage, was explicitly designed to stoke up the fear of global warming to an unprecedented pitch. As one of the organisers put it, "this is not a regular scientific conference: this is a deliberate attempt to influence policy". . . . .

What a striking contrast this was to the second conference, which I attended with 700 others in New York, organised by the Heartland Institute under the title Global Warming: Was It Ever Really A Crisis?. In Britain this received no coverage at all, apart from a sneering mention by The Guardian, although it was addressed by dozens of expert scientists, not a few of world rank, who for professional standing put those in Copenhagen in the shade. . . . . .

New Fox News Op-ed: The Obama Administration's changing positions on how bad the recession is

Last Friday, Lawrence Summers, the White House Economics adviser, blamed a fearful public for dragging the economy down and said that there was an “excess of fear.” Summers is right that an “excess of fear” has really harmed the economy and that that the downturn has been much sharper than it had to be.

Fear has scared consumers into changing their spending decisions. Businesses that would have gotten money from those consumers have had to change their plans and cut back on employment. The increase in unemployment is temporary as the money hasn’t disappeared, but simply gone to other places and it takes time to move jobs around.

More news coverage on academic freedom at our universities

Should college students be challenged by new and unfamiliar ideas, even if those ideas offend them or make them feel uncomfortable? An incident that occurred last fall at Central Connecticut State University suggests that the answer, as far as campus administrators are concerned, is no — that the comfort level of students matters more than their education.

In October 2008, students in a class in the department of communication at Central were asked to select a topic covered by the mainstream media and discuss it in class. Students were free to express their opinions on the topic they selected. At least that is what they thought they were allowed to do. . . . .

Why Government shouldn't mandate what people buy

The Ford and Honda hybrids due out this month are among dozens planned for the coming years as automakers try to meet new fuel-efficiency standards and please politicians overseeing the industry's multibillion-dollar bailout.

Unfortunately for the automakers, hybrids are a tough sell these days.

Americans have cut back on buying vehicles of all types as the economy continues its slide. But the slowdown has been particularly brutal for hybrids, which use electricity and gasoline as power sources. They were the industry's darling just last summer, but sales have collapsed as consumers refuse to pay a premium for a fuel-efficient vehicle now that the average price of a gallon of gasoline nationally has slipped below $2.

"When gas prices came down, the priority of buying a hybrid fell off quite quickly," said Wes Brown, a partner at Los Angeles-based market research firm Iceology. "Yet even as consumer interest declined, the manufacturers have continued to pump them out."

Last month, only 15,144 hybrids sold nationwide, down almost two-thirds from April, when the segment's sales peaked and gas averaged $3.57 a gallon. That's far larger than the drop in industry sales for the period and scarcely a better showing than January, when hybrid sales were at their lowest since early 2005.

In July, U.S. Toyota dealers didn't have enough Prius models in stock to last two days, and many were charging thousands of dollars above sticker price for the few they had.

Today there are about 80 days' worth on hand, and dealers are working much harder -- even with the help of $500 factory rebates -- to move the egg-shaped gas-savers off lots from Santa Monica to Miami. . . . .

From June 2008 to February 2009, most state agencies either increased or kept the same number of full-time employees, according to a Bee analysis of personnel data. The state also failed to lay off as many part-time employees during the crisis as promised by the governor.

While legislators and Schwarzenegger debated how to close a $40 billion budget deficit, 66 state agencies saw a net gain of full-time employees, 35 kept the same number of employees and 55 lost employees, data from the state controller's office show.

The overall number of full-time state employees increased by roughly 2,000, or 1 percent, excluding the Department of Forestry and Fire Protection, or Cal Fire, which always shrinks sharply outside of fire season, the figures show.

While the increase is modest compared with other years, it clashes with the belief that the state work force must shrink to meet the current economic downturn and resulting drop in state revenue. . . . .

John Fund on Ron Silver

In the WSJ Political Diary today, John Fund notes this:

Actor and liberal-turned-conservative activist Ron Silver knew how to live -- and also how to deal courageously with the cancer that claimed his life yesterday at age 62. . . . . Ron Silver was not only a gifted actor but a brave man, who admitted that he lost jobs in Hollywood after becoming a conservative. But he told me that many Americans had given up far more to stand up for what they believed in, and he had no regrets. He will be missed.

3/15/2009

Obama administration wants to guard border to stop US guns from going to Mexico

The notion that if the US didn't have guns that Mexican drug lords wouldn't be able to get them to defend their valuable drugs and fight their drug wars is silly. Fox News has the story here:

Homeland Security Secretary Janet Napolitano said the Obama administration would soon unveil a plan for dealing with rising violence along the U.S.-Mexico border, including more resources to stem the flow of dollars and guns to warring drug gangs, the Wall Street Journal reported.

"I think there will be some announcements with some specifics that either I or the president will be making in the coming weeks," Napolitano said Friday during an interview.

Napolitano said the plan would include more resources aimed at stopping U.S.-acquired firearms and cash earned from illicit drug sales flowing back across the border. Money and guns are fueling the escalating violence in Mexico that is spilling into U.S. communities, including in Arizona. Napolitano was the state's governor before joining the Obama cabinet. . . . .